Record selling of Canadian bonds by EM countries – Nomura

By FXStreet Charles St-Arnaud, Research Analyst at Nomura, suggests that FX intervention by EM central banks is likely behind some of the record selling of Canadian bonds by EM countries.

Key Quotes

“Non-residents reduced their holdings of Canadian securities by C$1.4bn in December, after increasing their holdings by C$2.9bn in November. The buying was concentrated in bonds (-C$6.8bn), while there was also some buying of money-market instruments (C$2.7bn) and equity (C$2.6bn).

The decrease in bond holdings was in government bonds (C$5.2bn), mostly federal government instruments (C$5.2bn), and corporate bonds (-C$1.5bn). The flows into corporate bonds were interesting, as flows into public corporations were negative (-C$3.1bn), while flows into private corporations were positive (C$1.6bn).

The buying of money-market instruments was mainly in corporate instruments (C$1.9bn), while there was selling of federal government instruments (-C$2.2bn). Some of the weakness in government-issued instruments partly reflects seasonal patterns that see negative net issuance on the month.

On a regional basis, the selling of bonds was mainly from the UK (-C$5.1bn) and EM countries (-C$3.8bn), while there was some buying from other EU countries (+C$2.8bn). This is the fifth consecutive month of selling by EM countries, with selling totalling C$9.6bn, and the biggest monthly change on record.

Foreign purchases …read more

Source:: FX Street